Hedge Fund Caxton Makes $270 Million From Market Turbulence

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Hedge fund Caxton Associates posted gains of about $270 million this month as bets on U.S. government debt and the Japanese yen made it one of the big winners in the recent turmoil in global markets.

The London-based firm made 3.9 percent of the $4.5 billion Macro fund, which is personally managed by chief executive Andrew Law, in the first nine days of August, according to figures sent to investors and seen by the Financial Times. It also posted a 1.1 percent gain in its $8.5 billion global fund, according to one investor.

The gains come in a turbulent month for global markets, driven by fears that the US Federal Reserve has been too slow to cut interest rates in response to signs of a slowing economy.

US megacap tech stocks and Japanese shares were among the worst hit in the rout, while the market’s “fear gauge” hit its highest level since the start of the coronavirus pandemic.

Caxton declined to comment.

Caxton, which manages $13.5 billion in total assets and is one of the world’s best-known macro hedge funds, was helped by a bet that short-dated U.S. Treasuries would beat longer maturities, according to people familiar with its positioning . These so-called “tilt” trades have done well in recent weeks as investors have begun to price in rapid rate cuts by the Fed.

The firm also benefited from a bet on the yen, which has rallied strongly against the dollar over the past month as investors who had borrowed the Japanese currency to invest in higher-yielding assets quickly exited those positions.

The gains leave Caxton Macro up 9.9% so far this year, according to the investor update, following July gains, while the Global Fund rose 5.2%.

Kirkoswald Capital, the firm run by Australian hedge fund star Greg Coffey, also made “hundreds of millions” of dollars during the market chaos, the FT reported last week.

Macro funds, which bet on movements in global bonds, currencies and other assets, had gained an average of just 0.2 percent this year through Monday, according to an index compiled by data group HFR.

Caxton, which was founded by American billionaire Bruce Kovner in 1983, in its early days used to fly copies of the FT from London to New York, which it claimed gave it an edge over its rivals.

In 2022, it told investors it would close its new-money Macro fund on the back of big gains to avoid it becoming too big and potentially dampening returns.